IRS to Issue Long-Distance Phone Tax Refunds

Taxpayers will be able to apply for a refund of the federal excise tax on long-distance telephone service for the past three years.

The Internal Revenue Service will issue the refunds, which can be claimed on taxpayers' 2006 tax forms, to be filed in 2007.

"So taxpayers won't have to spend time digging through old telephone bills, we're designing a straightforward process that taxpayers may use when they file their tax returns next year," said IRS Commissioner Mark W. Everson, in a statement. "Claiming a refund will be simple and fair."

About $13 billion will be refunded to consumers, who will be given the option of calculating actual taxes paid, or claiming a standard amount set by the Treasury and IRS. The tax will officially end July 31 and taxpayers will be eligible to file for refunds of all tax, plus interest, that they have paid on long-distance service billed to them after Feb. 28, 2003.

The announcement comes on the heels of the Treasury Department's decision to concede a legal dispute over the tax, after five federal appeals courts upheld rulings that the tax does not apply to long-distance service as billed today. Companies have argued that the 3 percent tax should not be applied to all long-distance calls, with many phone plans now ignoring the distance of calls.

Originally established in 1898 as a kind of luxury tax on wealthy Americans who owned telephones (and to help fund the Spanish-American War), the tax was calculated based on both the distance and duration of calls. The government said that the tax is no longer compatible with the information-age society of today.

"Today is a good day for American taxpayers; it marks the beginning of the end of an outdated, antiquated tax that has survived a century beyond its original purpose, and by now should have been ancient history," said Treasury Secretary John Snow, in a statement.

The federal excise tax on local telephone service remains in effect, as do various state and local taxes and fees paid by telephone customers.